China's economy has struggled in recent months amid a depressed level of consumer confidence and a devastating housing bust coupled with weak credit demand. Late in September—just after the U.S. Federal Reserve announced its first federal funds rate cut in several years—the People's Bank of China unveiled a three-part monetary stimulus program to reduce reserve requirement ratios (the amount of cash banks are required to keep on hand), mortgage rates and down payment requirements, and more.
Some economists view monetary easing of this kind as limited in its potential impact during an economic downturn. Still, the immediate response of Chinese markets to the announcement has been a flurry of activity and a significant rally. The CSI 300, an index representing 300 of the largest publicly traded, Chinese-listed companies, is up by nearly 24% in the last month. Following the stimulus reveal, it had its single best day in nearly two decades.
A dip in Hong Kong stocks late in September prompted investors to speculate about how long the rally would continue. Indeed, consensus seems to be growing that a sharp reversal may be in store at some point if the stimulus measures are deemed to be ineffective overall. Still, there are several companies investors may wish ...
